Chairman's statement

We are continuing to develop significant
growth opportunities

“We have achieved a great deal during the past twelve months
and we can be confident about the opportunities that lie ahead.”

Bill Halbert
Executive Chairman
Our ambition

To become an acknowledged leader in the markets we
serve and an automatic partner of choice for individual
consumers and organisations in those markets

Helping customers benefit from

Progress in our markets

2011/12 was a year of further successful development of the Group, with strong progress in a number of key areas. That progress is reflected in the quality of our results and especially in the continued strength of the Group’s cash generation capability.

Our focus for the year has been our growth agenda, with a particular emphasis on growing our market share in the provision of managed services to UK organisations. We have been successful in attracting strong brands from the enterprise markets and in continuing to build relationships with key customers, including Asda, Morrisons, Dominos and Phones4U, while strengthening still further our position in the Public Services Network (PSN) market.

The PSN model is one that is being adopted by local authorities across the UK as a means of delivering a range of public sector services across one common platform. It offers organisations such as councils, health authorities and other regional public bodies the opportunity to gain access to a menu of services, without the need to go through their own individual procurement processes. This allows a more cost effective means of providing services to their communities. We are delighted that our Kcom brand has been selected to provide PSNs to Staffordshire, Dorset and the East Midlands (EMPSN).

Securing such contracts would not be possible without the strong relationships we have in place with key partners such as BT, Cisco, Avaya and Microsoft. Our specialist teams work closely with our partners to make sure we build the right services to serve our markets.

In Hull and East Yorkshire, I am delighted to say that our KC brand continues to outperform its peers across the rest of the UK, delivering growth in what is regarded as a mature and declining market. Demand for broadband and bundled services continues, offsetting the decline in call revenues.

We invested also in deploying an initial phase of fibre based broadband services, achieving speeds of 100Mbps and transforming the user experience for our customers. Meanwhile we have completed the removal of all ‘not spots’ in our regional network, allowing us to provide minimum 2Mbps broadband speeds to all our customers, three years ahead of the government targets for Digital Britain.

In September, the Group was promoted into the FTSE 250 index, making it one of the 350 highest valued public companies in the UK. While this stands as a testament to the Group’s very successful restructuring over the past three years, we do still need to complete our transformational journey by succeeding in our growth and market leadership ambitions. We continue to invest in our growth areas and, whereas currently the growth being achieved is offset by residual decline in revenues from activities in which we are not investing for growth, we are very confident of our prospects and fully committed to achieving our plans for this phase of the Group’s development.

Dividend

The Board is proposing a final dividend of 2.67 pence per share (2011: 2.50 pence per share). In addition, the Board reiterates its commitment to delivering a minimum of ten per cent per annum dividend growth over the current financial year, reflecting its confidence in the Group’s cash generation and continued performance.

Board update

Following consultation with our largest shareholders, the Board has asked me to remain in my role as Executive Chairman. This extension delivers continuity in leadership through the next phase of the strategic development of the Group. I am delighted to continue working with the Board and management team at KCOM Group as we move towards achieving the Group’s ambitions.

I believe that we continue to have an extremely effective Board at KCOM Group, with a very open culture where challenge and debate is actively encouraged. We have a balance of Executive and Non-Executive Directors, who bring diversity of experience and expertise to the Board. We have also a strong Senior Independent Director who is available to both shareholders and other Board members if any issues were ever to arise, for example, in relation to my combined role. Our annual Board evaluation highlighted the mutual trust and respect between Board members as a key area of strength, along with the level of contact that the Board has with our senior executives, which was a specific area for focus this year following feedback from the Board evaluation last year. Further information on the way the Board operates can be found on the Corporate governance page.

Our people

The success of the Group you see today is heavily dependent on the quality of its people. Our customers measure our performance on the skills, capability and service we deliver.

The progress we have made this year would not have been possible without the commitment, focus and dedication of everyone across the KCOM Group. On behalf of the Board I would like to thank all our employees for their continued support of our business and the ambitions we share for the future.

Outlook

The KCOM Group continues to deliver growth in profits and generate excellent cash conversion which, together with our strong balance sheet, enables the Group to continue its investment in growth in its chosen markets. The results demonstrate the progress we are making towards our longer-term objectives. The Board expects the Group to continue to perform in line with expectations in the current year.

Bill Halbert

Executive Chairman

31 May 2012

Back to top


In summary

This year, the Group has focused on maintaining progress against its longer-term ambitions. Highlights include:

  • growing our market share in the provision of managed services to UK organisations;
  • working with our partners to deliver new and innovative solutions; and
  • deploying our initial phase of fibre based broadband.

 

2011/12 Full year dividend
4.00p


Committed minimum dividend
growth for 2012/13
10%